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June 18, 2015

McDonald's to Shrink in USA

Most of the reporting on this topic has centered around "under performing" stores. That may be true but will this also be used to harvest the equity in locations owned by the secret real estate investment trust? No matter what the sales volume?

8 comments:

Anonymous
said...

WOW! A small flicker of sanity coming from Oak Brook. MCD has had too many underperforming stores for too long. Stores build from the misguided notion of gaining "market share" or of keeping the competition from gaining a foothold. It was BS then and now. The result is that stores were built for this purpose that underperformed, impacted healthy MCD's and in the end had no effect of stopping competition. This policy and stupid management damaged many operator organizations and made MCD weaker with little impact on competition. Closing stores is a good move, in my opinion. However, owners need to be fairly compensated. I think they could close a thousand USA stores and the system would be stronger. This shows, in my opinion, that the misguided policies and failed leadership must be reversed before real progress will be made going forward. In addition, to closing stores they need to clean out od Oak Brook the management that got us in this mess.

I'm told that MCD top Management is focusing most of their time and effort to find a "quick fix" to protect earnings this quarter. Wall street has them under a micro scope and a bad earnings report could cost the company mega millions. If management knows earnings are going to be soft selling their stock could very well happen. However, if you are optimistic about the future for MCD poor earnings could present a great buying opportunity.

McDonald's continues to push the Operator to Financial insanity..... You can only push so far and they have squeezed every penny out of the stores. They should market themselves as the "If you like PERPETUAL DEBT, McDonalds is the BRAND for you" I would truly like to see who is in the pipelines to purchase stores for the next 20 years. I am sure they will have no back ground in finance and just want to BUY A JOB.

I'm surprised that there has not been more focus on the finance/debt issues by MCD in the Business Media. Many stores have good operations but the problem comes from declining sales and costs below the PAC. Top line and below PAC. Lower sales on the top and servicing the principle and interest payments on unreasonable debt, high rent, below PAC is destroying cash flow. Many good stores running 35% PAC's have no positive cash flow. We have got to get sales back and payoff or restructure debt. Plus, taxes are just too high. Fix the food and the menu board. Close underperforming stores that have impacted healthy stores.

In response to "I'm surprised". Many if not all stores run at top notch levels due to the RDM and major focus on building the peak. Spotless Stores, Fantastic facilities, the most focused managers and Great Owner Operators. The Question everyone, WHY DECLINING SALES? Simple more choices, more healthier choices and better tasting food. McDonalds cant do much more. It is only going to get worse as the market segments even more in the next 5 years. The Brand is a Powerful Brand but not as relevant and may never be as relevant as it was in the past. They should use their might to buy up and coming brands teach them the "system" and leave them alone like Chipolte.